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British trade negotiators made last-minute concessions to India that could undermine one of the UK’s most prized steelmaking assets in order to secure a much-lauded trade deal, according to some industry insiders.
A decision to grant India large quotas of galvanised steel during eleventh-hour negotiations in June to secure the UK-India free trade deal came despite UK government moves to protect the British industry from cheap overseas imports.
Union leaders and industry insiders said the quotas were particularly harmful for Tata Steel UK’s Llanwern plant in Newport, South Wales, which makes 600,000 tonnes of galvanised steel a year, nearly half of total UK demand for the material.
Alasdair McDiarmid, assistant general secretary of the Community union, whose members include steelworkers, said that while its members welcomed recent government moves to protect the UK industry, including nationalising British Steel, he warned that the quotas were punitive.
“We are seriously concerned that the quotas for galvanised steel will threaten the sustainability of Llanwern steelworks — a crucial strategic plant supplying top-quality galvanised steel to the automotive and construction industries,” he said.
Three people familiar with the negotiations said the UK had told New Delhi it was planning to make significant reductions to India’s tariff-free allocations as part of a separate move to protect the industry at home.
Starting this month, the UK government will impose a steel safeguards regime, halving quotas and doubling steel import tariffs to 50 per cent following similar moves by the EU, US and Canada designed to combat a global glut of steel, mostly from China.
However, as the July 1 deadline to announce the new steel quotas approached, insiders said the UK was forced to retreat on galvanised steel quotas after New Delhi threatened to delay implementation of the UK-India free trade deal announced last year.
Alok Sahay, secretary-general of the Indian Steel Association, explained that the UK had initially planned to cut India’s quota “by a substantial quantity” but relented during the negotiations.
“I must compliment the Indian government for this,” Sahay told the FT, adding that Indian Prime Minister Narendra Modi and commerce and industry minister Piyush Goyal had “been focused on the [steel] industry and what will help India”.
India’s commerce ministry confirmed that New Delhi had asked London to “enhance” the steel quotas. “After prolonged and intense discussions . . . India has been able to secure robust market access and continuity for Indian exporters,” it added.
Last year, India exported 43,000 tonnes of the product — known in the industry as “Category 4” steel — to the UK, according to data from International Steel Statistics Bureau. After negotiations in June it was handed a 125,000-tonne quota when the UK announced its new steel quotas on July 1.
Because World Trade Organization rules require equal treatment for comparable exporters, larger quotas were also granted to South Korea and Vietnam of 100,000 and 175,000 tonnes, respectively.
When the final quotas were announced, Tata Steel UK chief executive Rajesh Nair issued a statement saying the company was “very concerned” about the implications for the long-term competitiveness of the industry.
One insider said the quotas could cost the UK industry “hundreds of millions of pounds” in lost revenues.
McDiarmid, of the Community Union, said imports from Vietnam, which reprocess excess steel from China, posed the biggest threat.
“Our members can see mounds of South Asian coils piling up on Newport docks and they don’t understand why Llanwern appears to be the only plant without any increased protection from the new quotas,” he added.
Steel industry policy experts said they were “baffled” by the government’s decision to expand quotas for galvanised steel, given that it had taken steps to restrict imports from Vietnam and South Korea last year.
“For the majority of the categories, the government took the bold steps the industry required. The decision to in effect liberalise category 4 for non-EU countries was therefore baffling,” said Peter Brennan, director of trade at UK Steel, the industry body.
A government spokesperson said: “Our steel measure aims to strike the right balance between protecting domestic production and maintaining a secure supply.
“The final quotas were shaped by extensive engagement with industry, and we will continue to take their feedback into account when we review the measure after 12 months.”
